Old Fart Has a Prediction...

[makapaaa]

<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 3, 2010

</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Volcker Rule unlikely to take effect, says MM Lee
Strong resistance to making proprietary trading off-limits

By EMILYN YAP

(SINGAPORE) The US is unlikely to adopt the proposed Volcker Rule aimed at banning risky proprietary trading by banks, said Minister Mentor Lee Kuan Yew yesterday.

<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD></TD></TR><TR class=caption><TD>Mr Lee: Does not think that last year's climate talks in Copenhagen were a complete failure and believes that China is committed to growing in a sustainable manner </TD></TR></TBODY></TABLE>Mr Lee was speaking at a dialogue session organised by the Inter-Pacific Bar Association as part of its 20th anniversary conference. He expressed those views in response to a question on whether bank sizes and activities should be controlled.
The topic has been widely debated in the wake of the financial crisis. Some market watchers have pointed fingers at banks which strayed from their traditional deposit-taking and lending roles and instead, traded risky securities actively for their own accounts.
Paul Volcker, former Federal Reserve chairman and now adviser to US President Barack Obama, recently suggested making proprietary trading off-limits to banks. But resistance from the banking industry and some politicians has been strong.
'I agree with Paul Volcker,' Mr Lee said, believing that the banking system would be stable with the rule. But he added: 'Would it happen? I don't think so.'
Regulatory arbitrage would be an issue. As Mr Lee explained, should the Volcker Rule take effect in the US but not in other countries, banks can simply move abroad, such as to Canada or the UK.
How the world financial system develops will affect Singapore. 'You grow as the world economy grows and the banking system grows. If that slows down, and they don't grow at an exponential rate, then we will also stop growing at an exponential rate.'
Critical to the development of a financial centre is the workforce's command of English, Mr Lee also said. He was responding to another question on how Shanghai could distinguish itself from other Asian cities such as Singapore, Hong Kong and Tokyo.
Shanghai will be the biggest and most sought-after city for banks and other corporations, Mr Lee said. 'What's missing - the software.'
According to him, Shanghai needs to have a large English-speaking population, including lawyers and accountants, to support financial institutions which largely transact in English.
Mr Lee also spoke about climate change - which was the theme of the dialogue session. He does not think that last year's climate talks in Copenhagen were a complete failure, and believes that China is committed to growing in a sustainable manner.
'The Chinese are doing it very systematically. They've set the internal target,' he said. What China does not want is a target which allows the world to see if it has lived up to its pledge.
Combating climate change on the global front is likely to be difficult, Mr Lee acknowledged. 'The problem is almost intractable. Everybody knows what has to be done, but every government knows if it does it now, it will lose in the next elections.'


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[Received_by_Kings]

"Some market watchers have pointed fingers at banks which strayed from their traditional deposit-taking and lending roles and instead, traded risky securities actively for their own accounts."

If that happens between now and the future when times get harder then less and less people would trust the banks much less, put their savings with them (or even be discouraged from the age-old virtue of frugality ie saving for a rainy day).